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Thanks for taking you time to read my post and send a reply.
So my big question: What do you all look for when sourcing your next Rent To Rent property deal?
I've really been thinking the last couple of months that rent to rent would be a great way to gain passive income without having to own the property and without having to spend a lot of money yourself. I understand the only reason we will get these agreements from tenants is that the properties themselves will be a bit worn out and just need a small refurb throughout.
However when you are looking for potential rent to rent opportunities and calculating your potential ROI are you doing? Are you always looking to add additions rooms to the property or are you simply looking for a big enough discount on the property?all help and input would be very much appreciated
Hi Ashley,The profit from Rent to Rent is based on the difference between what you pay the landlord and what you can rent the property for.Therefore, you will increase the margin for each lever you tweak - such as gaining a discount from the landlord, and then adding another letting room such as using a dining room as a bedroom.However, you must be aware that Rent to Rent only really works compliantly on freehold houses without mortgages on them and, if you add too many un-related tenants you could create an HMO which may require licensing.Rent to Rent is one of those things that sounds great in theory, but when you get down to the detail - and the devil is always in the detail in property - then you find that its a whole lot more difficult and fraught with pitfalls than it originally seems.Courses will claim that you will be making £1000.00 per property per month profit. But I would take a "0" off that in reality.One of the best known R2R trainers admitted to a friend of mine that he was netting £100 per property per month. One void room, and you are operating at a loss.Are you in a financial position to pay the landlord the rent if you can't fill the rooms? Do you have a few thousand pounds needed to set up the property compliantly. A contact of mine runs a professional R2R operation in London and he operates at loss for the first 12 months, due to the set-up and compliance costs.It sounds great in theory, but in reality I suspect it is nowhere near as lucrative as the trainers claim. If it was, they would be doing more R2R, not running training courses to create more competitors to themselves!Sorry if that was not what you wanted to hear, but I am just sharing my opinion which I believe is realistic. Others may have a different view, and I suggest you read through all the discussions in the Rent to Rent category.
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
HI Vanessathanks for your reply and your concerns.
I have thought all about this already and you’re right you do need some money behind you just in case you don’t get any tenants to rent the property you are still required to pay the landlord the agreed monthly costs.I believe I’ve the best way to do RENT2RENT is to make sure if all the room where occupied you would be able to recoup off the funds you have spent renovating the house within 6months and also you make profit of a tleast 1 and half rooms, this way if a room was void the half a room you would still be receiving profit. This wouldn’t be a lot of profit but it would keep you in the green.
Also i believe In the contract/agreement you wouldn’t starting paying the landlord until the rooms have all been rented out or at least the majority. If we have 4 room we would require 3 rooms to be rented before the landlord starts to receive there monthly funds however after the rooms have been rented the landlord would always receive there monthly funds regardless if there was people in the room in 6 months time etc.
Also i believe In the contract/agreement you wouldn’t starting paying the landlord until the rooms have all been rented out or at least the majority. If we have 4 room we would require 3 rooms to be rented.Sorry, but I cannot see any landlord agreeing to that. Why should they wait for you to rent the rooms? The whole point of your offering is that you are guarantee-ing the rent. If you cannot afford to pay the landlord from day one and on-going, whether rooms are rented or not, then you should not be getting involved imho.
i don’t quiet agree and I also beleive this depends on the situation.
For example if we have a landlord that is struggiling to rent there property due to a refurb needing done on the property then they would need to allow us a certain time frame to bring the house back up to scratch.
I’m just trying to understand when you would start paying the landlord. I beleive atleast one of the rooms should be rented before the agreement has started to start paying the landlord however yes there should still be a time frame on this.
in the agreement there should be something like a timeframe for the work to be done on the property and time for you to get tennants in the building. As soon as one tennants is in the building payment to landlord should commence. However, if you go over this timeframe, the work on the house isn’t compete and you have no I tennants then yes the landlords should still be getting there agreed payment.
You never mentioned refurbing the property. Why would anyone invest money in a refurb without owning the property or knowing that the rooms were going to rent out? You could spend a few thousand pounds, not rent out all the rooms, and keep delaying payment to the landlord - but that will surely end in tears? You could spend all that money bringing the property back up to standard, and then the landlord could simply end your agreement and take the property back, unless you invest money in having a water-tight agreement drawn up by a solicitor.All I can say, is that all this sounds great in practice, but the reality is rather different as many people who embarked on R2R have found to their cost!
thanks you for all your concerns and this is something we will be taking on board. We believe 90% of the properties where landlords are struggling to rent is generally due to the condition of the property. We would simply renovate the property back to a nice spec so its alot easier to rent and also the rent price can be increased.
In the contract there would be an agreement that we have control of the house for a min of 3 years but if the landlord for whatever reason needed to pull out of the deal then they would need to pay for the renovations costs we have incured + an early repayment fee.
Of course if the rooms dont rent out this is the risk we take however we would make sure all rooms are to a high spec and some of the best in the area which in turn should hopefully mean our rooms would rent out alot quicker than other rooms and we would be confident that our rooms wouldnt take long to rent simply down to the location of the properties and the high level finish to the refurb.
Our profits per house would be a min of 1 and half rooms. For example if we had a 4 room HMO renting @ £400 each PCM then out profit would be £600 PCM. This would hopefully mean we can have one room that doesnt have a tennat and we would still be in profit or atleast break even after all bills/costs are paid.
I don't get Rent to Rent
why not just become a Landlord and buy a property
or am I missing something
Now If a Council came to me or Housing ass and asked to rent from me on a Rent to Rent basis I would go for it
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
There are many different reasons why landlord may want to do RENT2RENT agreement. If the house is worn down and the landlord doesn’t have funds to renovate then we would renovate the building for them and rent the rooms out whilst guaranteeing the landlord a fixed monthly fee.
The labdlord simply wont have to do anything, won’t have to worry about tenants or problems with the building, they will simply receive there guaranteed monthly agreed payment and me as the middleman would be dong everything else, finding tenants, renovating the property and managing the property for the agreed tile frame.
Rent2rent simply allows the landlord to have a backseat investment.
If your interested in hearing more and you have something properties you may wish to RENT2RENT then please send me a message and we can discuss further